It is unusual that the supervisory board of a large German corporation denies the dearest wishes of its Management. If the board does not like a wish, the wish usually won’t be rendered in the first place, the tight community of executive assistants will see to it. It would be most unusual that the board denies the wish of its CEO to run the company for another five years. Daimler’s board did the impossible: It denied Dieter Zetsche’s wish for another five-year contract, and gave Dr. Z. three years to get Daimler’s house in order. It’s a mission impossible. The mustachioed will sit out his career as a fall guy.

Daimler‘s and Zetsche’s target, to be the world’s largest maker of premium cars, has moved into a foggy future far, far away. What’s especially unnerving in Stuttgart: The Bavarian “peasants” and “upstarts” of Audi and BMW are far ahead, they are picking up speed and customers around the world.

European industry insiders, and the better informed media are taking the decision as what it is, “a warning signal,” writes DerSpiegel, “the board is at the end of its patience.”

Most of Daimler’s troubles are in the land that is home to the success of Germany’s automakers: China. The board fears that “Daimler’s luxury Mercedes Benz brand is losing out to Volkswagen’s Audi and BMW, particularly in the important Chinese market,” as China Daily can’t help to opine. Daimler is expecting flat earnings this year, mostly because it had been asleep at the wheel in the Middle Kingdom.

Especially in China, Daimler has become a victim of its institutional arrogance. The Benz brand has degenerated into the choice of affluent has-beens. The standard joke in China is that many Audis parked in front of a restaurant are signs of a party meeting. A row of BMWs signal a party by nouveau-riche hooligans. Whereas a parking lot full of Benzes indicates retirees having tea. Being a party boss or a rich hooligan is highly aspirational in China. Retirement not so much.

The castration of Daimler’s leadership has been made complete by castling Zetsche’s darling and crown prince Wolfgang Bernhard with truck chief Andreas Renschler. The 58 year old R&D chief Thomas Weber also received only a three year extension. The board tried to cover this with a new rule that says that top managers who will be 60 years or older during the next extension will only get three years. Other carmakers are led by more virile seniors. The current contract of Volkswagen CEO Martin Winterkorn, who will be 66 in May, won’t expire until January 1 2017. His Chairman Ferdinand Piech celebrated his 75th last year, and he hopes to live and work as long as Suzuki’s spunky Chairman Osamu Suzuki, who just turned 83.

Then there was the matter of the new contract of Legal and Compliance chief Christine Hohmann-Dennhardt. The former judge is 63 already. The board punted and delayed a decision until April, as Germany’s Handelsblatt heard. Then, that new rule is most likely forgotten.

In this both cynical and cyclical business, three years are not enough. The top of Daimler is set up for the fall. The competition is producing new cars faster than fertile rabbits, all the while Daimler received rancor for using a Renault engine in its latest A-Class, a sacrilege among Daimler’s aging customer base. The recent rise of the Euro already is blowing in the faces of German makers, it is especially chilling for highly “exportabhängig”, or export-dependent Daimler. Speaking of aging: Savvy insiders name Daimler as the next victim of Europe’s counting-down demographic time-bomb. Daimler’s customer core is around 60, and that segment is turning into a dying breed in Europe, very literally.

There are voices that say that there is a much higher order problem in Stuttgart. Daimler’s shareholdings are all over the place, and there is no big shareholder that puts his foot down and demands action. Credit Suisse analyst Erich Hauser opined to Reuters that part of the problem is “that no large Daimler shareholder, such as Kuwait, has a seat on the supervisory board like either the Quandt family does at BMW or the Porsche and Piech clans at Volkswagen.”

PS: Now that king and crown princes have been castrated, everybody is on the look-out for a new CEO. Three years is barely enough for such a search. Daimler’s CFO Bodo Übber is said to have the best chances at the moment. That’s just what Daimler needs, a bean-counter at the helm. But he is qualified. Übber is only 54.

Volume-schmolume. Part of what makes Mercedes-Benz (or any product) aspirational is that not everyone can own one. I remain convinced that chasing the “biggest” lux-maker moniker will be part of their downfall. Exacerbating that trend is that M-B has been chasing volume pretty far downmarket (A & B classes) relative to where they started in terms of the popular imagination.

But what do I know? I drive pre-Chrysler Mercedes that were built like anvils, and with surprising little (if very regular) maintenance, are still in quite nice condition; everything works. two or three times a year I still hear, “I wish Merc still made Mercs this way”.

There is nothing aspirational about an A-class. It might very well be a nicer car than the new Fiesta (Derek said yesterday something to the effect that small+hatchback=poverty in the minds of Gen Y and anyone outside The continent – but not only them). But the A-Class screams ‘nominally less poor than Fiesta but trying way too hard’. Ditto B-class.

Memo to The Mustache: Build the Mercs that people imagine when they think of the word fondly: Build cars for men of distinction which they might very well pass to their children. Only then will such men (and others) really aspire to one.

The only reason MB could survive as a company selling small numbers of “aspirational”-only cars in the US is because they sold large numbers of common cars and industrial vehicles everywhere else in the world.

In case you haven’t noticed, Europeans aren’t buying many cars these days. MB has to increase volume in the US and China or they go out of business.

Americans only see what MB USA wants to offer them, and MB USA has forever tried to build an image that MB is an “exclusive” product available only to the wealthy.

Go to any European city, and it becomes obvious that the A- and B-series are MB’s bread and butter (just as the A2 and A3 are for Audi, and the 1 for BMW). For good reason, Europeans need cars with a small footprint. But they’re not cheap.

That MB would put the B-class through the North American homologation process, intending to sell it only in Canada, tells you something about how important it is to them. A reasonably equipped B250 sells here for aound C$40,000 (plus tax), so it’s no Ford or Toyota.

Outside the US, MB cars are always marketed as premium products, but the company does not aspire to the snobbishness that characterizes MB USA’s efforts.

that is exactly the wrong approach. you are suggesting MB moves upmarket but can they? i think not. The top is Bentley/RR and they are pushing downwards (AKA RR Ghost and what not).
Going after the new young professionals is the right path to take. so kudos to the new CLA and A-class that is something i would buy. derek got it all wrong.

Remember Maybach? This didn’t work out so well, so now Mercedes has to find a way to grow and I agree with your assessment they are heading “downmarket” (as is BMW). This is risky because of both brand dilution and essentially decontented product (akin to Waterfall’s comment below). I don’t envy Dr Z at the moment, their company is in a precipitous position.

You’ve misread me. I am not suggesting they go upmarket, at least not from the E and S classes. I am suggesting they stick to what they know, to who they know and, more importantly, to what they are traditionally known for.

You espouse Mercedes chasing the young professional. Let’s drill down into that notion for a moment. Prima fascia, they’ve been trying the approach you’re suggesting for the past decade or so, and it hasn’t worked. Indeed, they are now near last place among German luxury car makers in volume terms. So, good work. The case against your position could be closed right there. But why hasn’t it worked?

I submit that the “young professional” demograph that you (and, evidently, Dr. Z) are chasing doesn’t actually exist. It was, in fact, a brief blip on the historical screen from roughly the ’80s through most of the ’90s when blindolded monkeys could throw darts and make money in the markets. Indeed, the notion of a young professional lived more in the popular imagination (The Secret of My Succe$s; Bright Lights, Big City; Wall Street) than in the reality of the workplace. The notion that one could get a degree from a moneyed institution, walk into a New York firm and name one’s price is largely a myth. That has always happened for a few of the best and brightest, but not in the numbers necessary to support a car company.

More concretely, I mean that just because a person in his or her 20s or 30s wears a suit to an office job does not mean he has the wherewithal to go about buying luxury cars. And to the extent he might, he will probably prefer something “more sporty”. Like an Audi or a BMW. Or, hell, a Mustang GT. That is the age of working to drink, and drinking to work.

Rather, those in their 40s and 50s and 60s are usually more well established, i.e.- are “real” professionals in sense that more of them more consistently have more discretionary money. They are also more likely to embrace the virtues of the “traditional” Mercedes: anvil-like build quality, longevity, safety, elegance.

Whether the modern Mercedes actually has those qualities or any others may be largely irrelevant. (I’m not suggesting that actual quality doesn’t matter. Indeed, it matters more now given what Derek called the democratization of quality.) What is important is that they live in the imagination of the target audience, and that that audience sees those attributes in the car and in themselves. And that’s what we mean when we say a car “resonates” with us. The car makes us think about it the way we think -or would like to think- about ourselves, or would like others to think about us.

A rough analogy may be had at Harley-Davidson. They continue to grow their market in the 45+ demograph but, despite strong efforts, have had trouble cracking the sub 35-year-olds. I think that is because they image of Harley, as it lives in the popular imagination, just doesn’t resonate with the younger riders. And why would it? Harley spent its first hundred years catering to grown-ups, in some form or another. In the ’30s and 40’s, Harley was the “Silent, Grey, Gentlemen” touting its comparatively quiet exhaust and civilized nature. Even in the rebel ’70s, Harleys were certainly not “kids’ bikes”, but bikes for grown-up badasses. Or whatever.

Likewise, Mercedes. From their foundation until sometime in the ’90s, Mercedes built a brand around the moneyed, well-established, not the young (“professional” or otherwise).

Lastly, TTAC has already well explored the fact that chasing a new demograph that your existing customers negatively identify with will not only fail to gain that new demograph but will also alienate your existing customers.

In sum, then. Few young persons have enough money to buy luxury cars, notwithstanding they might wear suits to office jobs. Of those young that do have money, most would prefer a car that projects a sportier image than does M-B. By chasing the young, who have proven reluctant to buy Mercedes in sufficient numbers, they may be alienating the somewhat older, more established, settled, actual professionals who do have enough money in sufficient numbers to sustain the brand, and who get a bad taste in their mouths when they see some kid driving the same brand.

2. no, i didnt misread you. “traditional Mercedes: anvil-like build quality, longevity, safety, elegance” dont come free. there is cost attached to all of those qualities. to cover for those costs, MB needs to charge more $. that is done by moving upmarket. this move, on the other hand, lessens scalability.

3. you are 50-60 and are about to buy your last car. sure, MB could build products that fit your needs/wants and alienate all the new customers who might buy several cars before they reach retirement age. think of Buick. the Verano looks hideous to me. sure some granny will buy it and for the next 5 years Buick will have good salesnumbers & appear heality. But after that – total breakdown.

4. noone buys new cars with cash on hand. not even in europe. for a young professional a 300 or 350 euro monthly bill doesnt differ much. young professional can afford MB cars if they appeal to them.

5. finally, your wishes/needs != reality for MB and what has to be done

EDIT:

to further elaborate point 3. think of it as Scion / pontiac. scion introduced the xB and tC and now the 86. all cars for the younger generations. pontiac had the g8 )targeting more older demographics).
so, which car company survived and which disappeared forever?

Uh, no. “you are 50-60 and are about to buy your last car”I just turned the big 50 this year. A car is supposed to last me 25 to 40 years? Now, if I had a Unimog and a red Mustang convertible; things might be different.

To your Point 1): You will have the right to criticize my writing at this site when you are 1) an editor at this site, or 2) have slept with me. Until then, if you don’t like it, you needn’t read it. At any rate, I have no intention of V-chipping my posts to match your attention span.

To your point 2): charging more is not necessarily synonymous with “moving upmarket”, a phase typically connoted relative to other market offerings.

To your gross assumption in your point 3): I am, in fact, 30-40, and I sorely doubt I’ve bought my last car. In case you were speaking hypothetically, I think most 60-year-olds might agree with me, as it happens, judging by the number of septuagenarians that nearly collide with me weekly. And by the number of 60-year-olds still driving C6 ‘Vettes around here.

To your 4): You may not know such persons, but they do exist. See, for example, the rich is this country, in many middle eastern countries, and in the middle kingdom. E.g.- If we take the rich as those earning $250k+/annum (as the President thinks), that would be about 2% of America’s population, or a little more than six million people. Are you telling me M-B can’t make money chasing that demograph?

To your EDIT): Scion is notorious for marketing to the youth, but actually selling to the middle-aged of modest means due to the high perceived practicality of many of their models. Indeed, you make my point for me: when the youth saw their poorer friends’ parents driving the xB, it instantly and permantently turned many of them off of the car. Precisely my argument is that when wealthy people see plebeians driving a certain car, it turns them off of that car, or even of that brand. It’s a well-known phoenomenon, and it’s well known to be more pronounced among the wealthy.

I think you mean “prima facie,” although most people don’t use the phrase the way you are. I’m not sure why they don’t, since it’s more of a literal translation.

As for the other stuff, E- and S-class buyers are probably still getting something akin to the traditional image of a Benz. C-, CLA-, certainly less so. I, and many others I know, have always considered a C-class a fake POS Benz for people who can’t afford a Benz, but these same people don’t consider a 3-Series not be a real BMW.

That said, it helps to keep people in the pipeline. That C-/CLA-class buyer could one day be an E- or S- buyer.

Corntrollio, a C-class is a Benz for those cannot afford an E-class or an S-class. Do remember, however, that Daimler has been in the small car business for about 90 years; while Daimler was delivering Pullman limousines to Pius XI and Hirohito in the thirties, they were also manufacturing much more modest offerings at the same time. Fast forward to the post war era, and note that the catalogue has always included “affordable” cars as well as the land yachts. And to your point about BMW, yes, a BMW 3 series is very much what the public associates with the brand. That said, may I suggest that if a C-class is a faux Benz, then a 7 series is a faux Benz as well. Or perhaps we’ll refer to it as a Benz manque. (No proper accent marks available.)

This. North Americans have a very warped perspective of what MB is/was all about. We see “aspirational luxury vehicle”, most of the rest of the world sees “million mile taxicab”. Sure, they sold a few S-class, but for the most part they sold sensible solid sedans to the upper middle class, with all the luxury of a cardboard box for the most part.

I also agree that the 3 (especially) and 5-series ARE the heart and soul of BMW, and the 7 exists to take some of the fatboy profit away from Mercedes.

You might have a point with the CLA, since it’s FWD. I do think It’s to early to make the judgement call since no one has been in it yet. How the C-Class, which is mechanically identical to the E and since the facelift the interiors are very similar, is somehow not a Benz is stretching it.

I may be a dinosaur (50 years old), but all of the current Mercedes products look like cheap imitations. I long for the days when I drove a Mercedes with doors that shut with a “thud” and was built like an anvil. I also believe the definition of “aspirational vehicle” means that not everyone will be able to own one. The SL and S-class are the only models left with any Mercedes DNA. The rest? Not so much. I think you can sell performance at a variety of pricepoints (think BMW), but I’m not sure you can sell aspirational luxury at all pricepoints (aspirational luxury for < $30,000?????).

I realize that I’m just a cranky guy, who doesn’t understand that consumers are supposed to sympathize with automakers who can’t find innovative ways to maintain the solidity and robustness of their vehicles, and therefore consumers should just cut these automakers a ton of slack, and overpay for vehicles merely because they sport a prestigious hood ornament, while they’re not significantly better (and in some cases worse) than vehicles costing 1/4 or even 1/2 as much in terms of interior materials quality, chassis design/fabrication, overall solidity & reliability/durability.

Blind fold someone– even one who knows a bit about cars– and take them for drives in MBs and “lesser vehicles,” while letting them get a feel for the ride quality (the S class may be the only Benz that has a significant advantage vs most others in this regard), quietness, interior material feel, overall solidity– and they’d struggle to determine which vehicle is the the premium one.

Mercedes has never been closer to a commodity of commodities than it is right now, having thoroughly diluted the attributes that defined its very heritage and reason for being.

The MBs of the late 80s through the latter part of the 90s were superior, for the most part, to any of the MBs sold today.

I will never forget, at the age of 16, driving around in a high school friend’s hand-me-down 1989 or 1990 (maybe 1991?) W124 Mercedes E class diesel that was a bona fide tank, and despite having well over 120,000 miles on it, was as solid as the day it was born.

M-B is your parent’s Oldsmobile; i.e. old school. Audi is new and fresh; as long as BMW makes a decent 3 series they’ll always be relevant.

I’m not sure I understand why a luxury car maker wants to be #1 in sales….

Finally, I think Volvo can become relevant once again if they had at least one boxy model that’s been modernized. Swoopy doesn’t fit the Volvo image, and they don’t have the legs to compete with MB, Audi or BMW. Go for different…..

Seriously. 2015 240 GL. Square headlights bigger than my head. 53 airbags and an AM/FM radio. A simple, boxy car so safe that if you are injured in a crash, will actually steal the soul from the other driver to save your life. Seriously.

european talked about Mercedes’ inability to go upmarket due to the presence of Rolls & Bentley, and I agree with him on that point. But if you want luxury features and comfort and don’t mind lacking a hood ornament…Have you *seen* the new Azera and Avalon and 300? Those cars are worlds better in every objective measure than my ’91 S-Class. Almost as big inside, quicker, faster, features Benz hadn’t even thought of, more reliable, less maintenance-intensive, better on gas. The only things other than a bit of back-set room I can think of where the old Merc might be better are insurance cost and maybe longevity (can the Koreans build a 30-year car yet?) Unbelievable.

But if you *do* want the hood ornament, well then you, Sir, are as boned as I.

“Have you *seen* the new Azera and Avalon and 300? Those cars are worlds better in every objective measure than my ’91 S-Class”

I have not (got up close), but how much do you want for the ’91 S-Class?

“I can think of where the old Merc might be better are insurance cost and maybe longevity (can the Koreans build a 30-year car yet?)”

I’m pretty sure Zee Germans aren’t doing this at this point either, which was my point on Mercedes not being Oldsmobile. It amazed me the amount of 2000ish era C and E classes I saw the last time I hit a junkyard in 2011 (both wrecked and intact), yet I see the 90s and earlier S and E class happily driving around.

Interesting that the quality dropped off right after leases started to get really popular. The biggest problem is people don’t maintain their cars anymore along with EPA friendly long service intervals.

Wasn’t it really the point when the Lexus LS400 showed up and instantly sold at higher volumes in the US than MB ever managed while offering a V8 and more features than the Germans for a price in line with their base 6-cylinder mid sizers? Mercedes started trying to reconcile their prices with their features lists instead of relying on their engineering to make the sale. When they approved their first 90 degree V6, they stopped being the company that once built great cars.

“The biggest problem is people don’t maintain their cars anymore along with EPA friendly long service intervals.”

Well, at least the S-class historically wasn’t built to a price point. That changed in the late 90s, but then things improved after the reliability issues of those platforms. Things were a lot better after that.

I don’t know what you mean by EPA-friendly long service intervals. But I do agree that people are often lazy about maintenance.

Hell, there are many people here on TTAC who think you shouldn’t have to do anything but put oil in a car, so they drive Civics and Corollas.

They claim their car needed nothing else, but I’ve seen the repair bills for a well-maintained Civic, and they are worse than a well-maintained Audi A4 up to when you have to do a timing belt on the A4 (even if you include actual cost of the dealer-paid-for service on the A4) — that’s 110K per Audi. Then the A4 moves ahead in terms of cost, but not that far ahead, to be honest. If you have an Audi, you expected to pay more for parts and service (although buying parts via the internet and not going to a stealership is much cheaper). I was shocked how much the Civic cost to maintain and how much unscheduled repairs were.

The problem on a Civic or Corolla is that most of the real service occurs during a “60K service” or a “90K service” and people don’t check the bill. Their cars had problems, but they just never knew better. Sure, it didn’t throw a CEL, but they were at risk of something worse happening.

You can’t tell me, reasonably, that a Corolla at 180K only needed oil and brake pads through its life. I bet if even I looked at that car, and I’m not an expert, I could find other stuff that’s broken.

Pure fantasy. Mind you the 2012 A6 I drive would never let me get away with running it with a problem without a warning light or message illuminated. Often, there are even warnings for problems that the dealer says aren’t there. Having owned two Audis(not this time! Audi Financial Services owns it), three Hondas, and having worked as a service writer at an all makes shop in 2005-2006, there is no point where the graph of Civic operating costs exceed those of a similarly aged Audi.

There are crooked dealer service departments representing all makes, but barring a rip off there is little to drive up Honda ownership costs for anything recent with FWD and a naturally aspirated 4 cylinder engine. V6s still have belts and any AWD car needs expensive maintenance, but Civic ownership is cheap and painless. Audi ownership being more expensive should come as no surprise, when the lease payment is three times what it would be for a Civic and the difference in complexity is maybe 100%. Still, it would be nice if Audi ownership were as headache free. The Audi dealer service department we use is excellent, far better to deal with than the Honda dealer I gave up on when they started trying to pad their bills a couple years ago. The headaches come from the constant warning lights and an 8-speed automatic transmission that has lost the plot after only 15,000 miles. We’re a couple months ahead of the lease rate in mileage accumulation, so I’ve been driving my Civic more often. The downside is that now I have to buy my own gas. The upside is it’s fun, has better seats, and doesn’t constantly remind me that it’s got problems.

The whole world is moving downmarket. Americans are transitioning from the D segment to the C segment. Europeans can’t afford cars. Companies from Renault to VW are looking to produce cars for emerging markets (read: CHEAP!!!). Back to America, the credit that fueled the “aspirational” buying of the mid aughts is nowhere near as forgiving. And their money maker fields are more competitive than ever. So they kind of have no choice but to look to new markets to grow, and the only markets growing are the ones at the bottom.

Also the irony of folks with 30 year old Benzes saying MB needs to build cars like that again to make money is not lost on this guy. Good cars aren’t necessarily good business if your current client base just cares about a badge

Daimlers problems are all self inflicted. WTF is an ADVISORY board doing running the company? As Derek put it so well, their INSTITUTIONAL ARROGANCE has blinded them to any sort of problem seeing or solving process.
This was clearly demonstrated in their ham fisted destruction of Chrysler, a company that came to them full of cash and innovative product that they managed to destroy in less than a decade! Well done DB!
Not to mention their inability to come up with any new or improved technology in the last twenty years, their constant legal foul-ups, especially in terms of bribery and corruption in third world countries.
I personally wouldn’t be caught dead in ANY mercedes product, mainly due to their horrid reputation and the fact that I’m not a murdering psychopath from some starving nation.

I think it’s pretty simple: Audi has nailed the looks. Mercedes, other than maybe the C class, is completely lost.

The new SL is a great piece of machinery, but the team that approved that front end should be fired. Since a decision like the new SL probably goes all the way to the top, Dr. Z really *should* be pastured. The E, the S – they all look terrible compared to Audi’s offerings of the last 10 years. BMW is somewhere in the middle.

In fact, it is remarkable to me how much the comeliness of a vehicle is a predictor of success. Case in point: Acura.

“that no large Daimler shareholder, such as Kuwait, has a seat on the supervisory board like either the Quandt family does at BMW or the Porsche and Piech clans at Volkswagen.”

If you note, the one American car company that is still family controlled, Ford, is probably the best managed one too (though that hasn’t always been the case). Family control can be a bad thing, but it also means that there is a core of stockholders with common interests. A company like GM, with diffuse ownership and pretty much absentee directors, is not going to be like a corporation that’s controlled by one family.

One could say that for much of its early history, GM was indeed family controlled, since the DuPont company owned enough of GM stock to have had enough control there that the Truman administration took anti-trust action that eventually resulted in DuPont divesting its 40%+ of GM shares in the early 1960s. I should note that GM was profitable under DuPont control.

GM made the DuPont family a lot of money, both as a vendor of paint and plastics and as shareholders in the automaker.

Mercedes slow gradual descent start with 1500$ down and 399$ a month leases on C classes. Or numbers similar to that. C classes filled the streets and parking garages around metro (subway) stations. All this led to raging debates on who was the biggest poseur? The leased C-class or the leased 3 series driver.